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Younger Aircraft Being Disassembled For Their Parts

Hundreds of commercial transports will be disassembled and parted out this year to feed airline demand for lower-cost parts and components in the face of rising fuel prices. But unlike 10 or 15 years ago, when most of the airframes torn down had reached the end of their useful lives, increasingly younger aircraft now are seeing premature ends to their flying careers.

At the beginning of the decade, about 50 aircraft a year worldwide were disassembled for parts, according to Abdol Moabery, president and CEO of GA Telesis, who spoke at Aviation Week's recent MRO Americas Conference & Exhibition. This year, GA Telesis alone expects to tear down 65 airframes, and Moabery thinks the global total likely will be 300-400 aircraft. Others in the industry say Moabery's estimate may be on the high side, but it is clear that parting out is on the rise.

According to consultancy AeroStrategy, 80% of available surplus parts come from parted-out aircraft and the other 20% from excess airline inventory. The ratio just a few a years ago was 60/40, according to Kevin Michels, a founding partner of AeroStrategy. Air transport spending last year on surplus was about $2.3 billion and spending on new parts was $12.3 billion, the company reports.

Many of the aircraft being disassembled are not ready for the scrap heap. “Because of fuel prices, we are obsoleting aircraft sooner than expected,” says Michaels.

“When I got into this business, we just parted out old airplanes,” said Moabery. “You parted out a couple of airplanes a year and that was the business.”

But the business model has changed and so has the sophistication of the companies involved. “We really look at the market trends and fleets and the types we want to go after as opposed to what's available,” Moabery said.

Among the aircraft Moabery says GA Telesis has or will part out this year are a Boeing 777, 757-200ERs and 767-300ERs, a type coveted by passenger to freighter conversion operators, as well as AirbusA340s, new-generation A320s and A300-600s, an aircraft for which Airbus is developing an operational life-extension program. “We're not just taking junk out of the desert,” he says.

Cost-conscious airlines are driving the demand for used parts and other alternatives to expensive new parts. According to some estimates, used/serviceable material can cost 30-40% less than new parts. Used parts with clean paperwork, particularly from engines, often are preferred by leasing companies over FAA parts manufacturer approval (PMA) items because sometimes it can be difficult moving engines equipped with PMA parts to new lessees.

But there are other factors at play as well.At least some of the recent increase in activity has been the result of airlines' financial problems. For example, Japan Airlines decided to retire all of its Boeing 747-400s as part of its bankruptcy reorganization. As a result, a significant quantity of GE CF6-80C2 engine parts made their way onto the material market.

“The displacement of aircraft leads to opportunities for us to buy and disassemble those aircraft,” says Moabery.

It's not just parts suppliers that are selling used material. Among the largest parts traders are engine OEMs GE Aviation and Pratt & Whitney. By AeroStrategy's estimate, seven of the 10 largest parts traders are OEMs or lessors.

GA Telesis is a parts supplier and an aircraft and engine lessor. “We look at the inventory way earlier than it hits our shelves,” Moabery says. “We'll structure an aircraft lease to end right around the point we think that there will be demand for the components,” he said.

MTU Maintenance, the MRO arm of engine component manufacture MTU Aerospace, will use parts from three older engines to build one powerplant for a customer, says Leo Klopper, senior vice president for marketing and sales.

Klopper estimated that if 63% of the average cost of an engine overhaul is for material, about 11% of that on average is spent on used, serviceable material.

The disassembly trend may have been a factor in the robust new aircraft deliveries the airframe OEMs saw during the recession. It is estimated by AeroStrategy and others that as many as 40% of the roughly 1,100 new aircraft expected to be delivered annually over the next few years are for replacement capacity.

But if fuel prices remain high and the parting-out trend continues, it could negatively impact airframe and engine MRO providers. If significant numbers of airframes and engines don't make it to their third or fourth heavy maintenance visit, MRO revenues could suffer, as could OEM spare part revenues.

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